Pay by commission

Indirect discrimination arises when an employer applies a provision, criterion or practice which, although superficially neutral, actually advantages one gender more than the other and cannot be justified. In The Audit Commission and Haq, the Employment Appeal Tribunal (EAT) said that an employer could rely on a pay protection policy following a re-grading to defend an equal pay claim, as long as there was no history of past discrimination.

Basic facts

In 2004, the Commission took over responsibility from the Housing Corporation for inspecting local authority housing. The employees who transferred over (mostly men) were placed at a point in the pay scale of Senior Inspection and Information Officer (SIIO) to protect their existing salaries.

The Commission then decided, with effect from 1 October 2007, to amalgamate the post of Inspection and Information Officer (IIO) and SIIO into a new post of Inspection Support Officer (ISO), a role very similar to the old IIO job. Rather than assimilate the IIOs into the new roles, however, the Commission decided to include the SIIOs in a ring fence with them.

As there were only 11 new jobs and 15 existing post holders, the employees had to go through a competitive selection process. Two of the posts went to ex-SIIO men who, because of their historical pay protection, were put on a higher point in the pay scale than the other nine (all of whom were women) appointed to the new roles.

The women claimed equal pay.

Tribunal decision

The Tribunal said that, as the advantaged group was exclusively male and the disadvantaged group was exclusively female, there was a prima facie case of sex discrimination which the Commission could not justify.

It found that in 2004 there was a justifiable distinction between the two roles of SIIO and IIO as each did different work. However, in 2007, the Commission made a deliberate decision to include the SIIOs in the ring fence for a new role which was largely an IIO role.

It found that the Commission had therefore “directly and knowingly create[d] a pay disparity of, at its maximum, more than £10,000 between men and women doing the same work. This was not fortuitous, it was deliberate, and the Respondent created this situation well aware that it was being suggested by the Claimants and indeed their own HR department that such a policy had equal pay implications”.

EAT decision

The EAT, however, disagreed.

It said that the Tribunal was wrong to focus on “Enderby-type” discrimination (allowing it to infer indirect discrimination in the absence of an actual identifiable provision, criterion or practice), as the cause of the differential was clearly the result of a policy which allowed ‘re-structured” employees to retain their previous pay point.

The question therefore was whether the policy applied in the re-structuring put women at a particular disadvantage when compared with men. The EAT could not see how it did. It found that as the women (even those on lower pay than the men) benefitted from the pay protection policy there was no disproportionate impact.

As there was no evidence of indirect discrimination, the EAT did not have to address the question of objective justification but did so in case it was wrong on the discrimination point.

The EAT concluded that protecting the pay of employees affected by a restructuring was a legitimate aim both as a matter of fairness to the employees and as a way of the employer retaining their services. The policy used in this case was a proportionate means of achieving that aim as “the extent of the protection matches precisely the loss which the employee would otherwise suffer”.